Authorization in 2009 of increased federal spending on "shovel-ready" infrastructure projects was intended to speed up the macroeconomic impact of the deficit spending by
A. paying for the projects with new taxes approved by Congress.
B. paying the entire contracted amount up front.
C. carefully designing the projects to save or create the largest possible number of jobs.
D. avoiding the lengthy design phase of the projects.
Answer: D
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If the government imposes a price ceiling that is lower than the market clearing price, then
A) consumer surplus will increase while producer surplus will decrease. B) consumer surplus will decrease while producer surplus will increase. C) both consumer surplus and producer surplus will decrease. D) both consumer surplus and producer surplus will increase.
Appendix: Incentive-compatible revelation mechanisms attempt to
a. induce an employee to reject the next best alternative employment opportunity b. elicit privately-held information c. secure enforcement primarily by third parties d. reject voluntary contracting with third parties e. impose similar risk premiums on all employees
In the long run, the Fed can change the inflation rate but not the unemployment rate
a. True b. False
Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and nominal value of the domestic currency falls. b. The real risk-free interest rate falls, and nominal value of the domestic currency falls. c. The real risk-free interest rate rises, and nominal value of the domestic currency remains the same. d. The real risk-free interest rate falls, and nominal value of the domestic currency rises. e. There is not enough information to determine what happens to these two macroeconomic variables.